sony music business overview - sony board member workshop

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  • 8/10/2019 Sony Music Business Overview - SONY Board member workshop

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    Music Segment

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    Sony Music business Overview

    Sony MusicEntertainment

    Sony/ATVMusic Publishing

    Ownership

    Sony MusicEntertainment Japan Music

    (JV with estate of Michael Jackson)

    100% 50%100%

    (JV with M

    Recorded Music

    3,470 Oku-yen (7

    Outside Sales : 4,900 Oku-yen

    Music Publishing660 Oku-yen (13% of Total)

    Visual Media & Platform770 Oku-yen (16% of Total)

    SME

    SME

    J

    SAT

    V

    SME

    J

    SME

    SMEJ SME:

    SMEJ:

    SMEJ:

    SME:

    (56%)

    (15%)

    (12%)

    (14%)

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    Competitor Comparison Worldwide Music Market Share

    Recorded Music Music Publishin

    No.2 in Recorded Music and No.1 in Music Publis

    *

    * Excludes Japan

    Revenues & EBITDA Amounts Shown for Comparative Purposes; Adjusted for One-Time and Other ItemsUNI, SME & WMG 12 Months Ended June 30, 2014

    Market Share - Worldwide share in CY2013 (Source: IFPI)

    (US$ Mil.)

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    6.3 6.87.6

    8.7

    7.0 6.2 5.24.5

    $ 13.3B $ 13.0B $ 12.8B $ 13.3B

    FYE15 FYE16 FYE17 FYE18

    Worldwide Recorded Music Market Projections

    +8.0% +11.0%+15.2%

    -11.9% -15.5%-12.6%

    -2.5%

    -1.6%

    +3.9%

    Source: Internal Estimates.

    CAG+11

    %

    14-1

    CAG-

    13.4

    CAGFla

    Recorded music market expected to return to growth throgrowth of digital access models which will more than of

    declines in Physical and downloads

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    MRP Key Strategy

    Sony Music Entertainment Grow market share, expand digital revenue models and enhance international oper

    Sony Music Entertainment Japan Expand recorded music and ancillary business as a total entertainment company

    Sony Music Publishing (Sony/ATV + EMI) Maintain worlds leading market share position of 30%+ and achieve fair market val

    rights in the United States

    2,7802,896

    1,5981,706

    544 617

    FYE15 FYE18

    240

    275

    140

    1

    100

    FYE15 FY

    SME

    SME

    SME

    SME

    SMEJ SMEJ SMEJS

    SMP

    SMP

    SMP

    Revenue Operating Profit

    +1.4%

    +2.2%

    +4.3%

    +4.6%

    +5.6%

    +7.0%

    CAGRCAGR

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    Sony Music Entertainment Key Strategy

    25.10%25.35%

    25.60%

    25.85%

    FYE15 FYE16 FYE17 FYE18

    Maximize New Talent Development Success Across All Our Creative Repert

    Aggressively Invest In New Talent

    Expand Our Relationships With Independent Label Sector

    Look For Opportunities to Sign Established Talent and Acquire Catalog

    Mid-Range Planning PeriodForecast

    +0.25%pts

    +0.25%pts

    +0.25%pts

    Flat Growth

    Grow Market Share

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    Sony Music Entertainment Key Strategy

    $686 $701 $706 $752 $830

    $577 $636$728

    $868

    $1,060$1.3 B$1.3 B

    $1.4 B

    $1.6 B

    $1.9 B

    TotalCAGR+13%

    SME Digital Revenues

    IntlCAGR+19%

    U.S.

    CAGR+7%

    Considers Market &Market Share Growth

    Estimated $0.6B GrowthIn Digital Revenues Overthe MRP Period Drivenby Significant Growth InPaid Streaming

    An Overall 44% GrowthFrom FYE15

    Expand and Grow Digital Revenue Models

    FYE14A FYE15FC FYE16MRP FYE17MRP FYE18MRP CAGR

    Downloads $817 $704 $600 $496 $401 -17%

    Streaming (Paid & Ad-Supported) 250 375 558 812 1,148 45%

    Video 85 120 158 194 217 22%

    Digital Radio 69 90 104 116 123 11%

    Other 42 26 13 3 1 -68%

    Total $1,263 $1,315 $1,433 $1,621 $1,890 13%

    (US$ Mil

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    Japan Recorded Music Market

    Source: RIAJ, ACPCSMEJ Analysis

    Japan original featurephone market

    Physical market are continuously reducing,digital market are rapidly decreasing at a peak 2009

    Physical

    Digital

    Other thanexpandingdecreasing Japan

    phone After th

    during from fe

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    Labe

    Marketin

    Distribu

    35%

    Solution &

    Rights

    23%

    Visual

    32%

    Label

    Marketing &

    Distribution

    45%

    Solution &

    Rights

    26%

    Visual

    13%

    Sony Music Entertainment Japan Segment Summary

    Revenue Operating Profi

    Total 1,600 Oku-yen Total 140 Oku-ye

    Artist Management& Music Publishing

    9%

    Net & Media / Live6%

    Artist Management& Music Publishing

    8%

    SMEJ has been implemented diversified business as a total entertainment comartist management, live and animation business beyond recorded music b

    SonCom

    (Animation)

    (Animation)

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    Sony Music Entertainment Japan Key Strategy

    Recorded music companies struggle with shrinking record music market anddifficult situation of producing hit products. Although live market isexpanding .

    Recorded Music

    Grow market share and expand digital streaming business Create an environment to produce hit products

    - Begin to exert effect of label reorganization in this April Diversity in ways of developing new artists

    - Partnership planning- Develop talent and creators not only artist- Diverse audition process

    Maintain physical market- Focus on idols, anime songs and 3rd party acquisitions

    Create digital market by SMEJ and regenerate music market- Enter into platform business like LINE Music

    Artist Management & Music PublishingAcquire rights other than recorded music

    Enhance talent, actor/actress and voice actor business

    Live EntertainmentEnhance live hall business and participate entertainment area

    1

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    Sony Music Entertainment Japan Key Strategy

    Important to make profit in non-recorded music business,during contraction of recorded music market

    Solution & RightsDecrease disk distribution business due tocontraction of physical marketEnhance merchandise business and digital area

    Steady performance in rights businessAcquire new property and rights

    Visual (Animation)Success production business target to core userAim to grow further

    Focus to produce titles which target a broader user Expand business other than production such as merchandise,

    international and game

    One-Stop Solution

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    Maintain position as the worlds leading music publishing company 30%+ market share

    Continue to make accretive acquisitions of new and controlled copyrights Pursue attractive investment opportunities

    Achieve fair market value for digital rights in the United States

    Sony Music Publishing Key Strategy

    Music Publisher Revfor every $1,000 at Retail

    Music Publishers are subject to belowmarket rates for digital performance rights inthe United States (Showing the chart as anexample).

    Negotiate direct deals with satellite radio(SiriusXM), interactive (Spotify, Deezer), non-interactive (Pandora) and video (YouTube)streaming services at fair market rates

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    Digital Performance Rights Royalty Flow U.S. Repertoir

    Subscription/Streaming

    Internet Radio

    ASCAP BMIPerformanceRights Org.

    (PRO)

    Sony/ATVMusic

    Publisher

    Use of Digital

    PerformanceRights subject toagreement

    Digital PerformanceRights entrustedmanagement

    Net Royalty

    Digital Streaming Service Platform

    (Current

    Subscription/Streaming

    Int

    Sony/ATV

    (Future )

    MusicPublisher

    Use of DigitalPerformanceRights subject toagreement

    Less 17% FeePRO/Administra

    ASCAP BM

    Net Royalty

    Less 10% Fee

    Digital Streaming Service Platform

    Higher thancurrentRoyalty rate

    MRP Fi i l S (M i S t T t l)

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    372

    502 506

    8.4%

    10.0%

    9.8%

    10

    4,417

    5,033 5,139 5,212

    5,3325,571

    MRP Financial Summary (Music Segment Total)

    FYE18 KPI: Revenue $4,8005,200OP% 10.511.5 %OIBDA% 13.514.5 %

    FYE13 FYE14 FYE15 FYE16 FYE17 FYE18M14M14M13M14M13M13M13 M14BudAct Act

    FYE13 FYE14 FYE15 FYM13M13M13 M14BudAct Act

    Revenue (Oku-yen) OP (Oku-yen)

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    Appendix

    S M i E t t i t K St t

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    Sony Music Entertainment Key Strategy

    PAID STREAMING

    WITHIN SUBSCRIBTION SERVICES

    AD-SUPPORTED

    26M Paid Monthly Subscribers

    520M music hours / month

    45M monthly listeners

    450M music hours / month

    1BN monthly users

    2.4BN music hours / month

    76M monthly listeners

    1.6BN music hours / month

    DIGITAL VIDEO

    DIGITAL RADIO

    OTHER CONSUMPTION

    Subscription Will Be Leading Revenue Channel b

    26M monthly listeners

    1.6BN music hours / month

    400M monthly listeners

    PAID SUBSCRIPT

    PHYSICAL

    AD-SUPPORTED

    $70

    $48

    $19

    $4

    DOWNLOADS

    AVERAGE REVENUE PER

    Strategies to support growth and healthy transition from ownership to acc

    N B i i SME

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    TV (Auditionprogram etc), $84

    Live, $74

    Brand/Sponsorship,$37

    Merchandising, $6

    Artist Management ,$11

    Other, $26

    Passive Artist RightsParticipation, $23

    SME Global FYE15Fct New Business Revenues ($ in Millions)

    New Business in SME -Maximize Opportunities With Broader Rights -

    Main TV format :A

    Program

    Artist T shirt

    Maximize opportunities with broader rights and new business Capture and exploit broader rights from new artist signings Continue to maximize exploitation of audition program and develop new formats and visual cont

    Total

    $ 261

    Total Op. EBIT$ 70M

    Recorded Music Royalty Flow U S

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    Recorded Music Royalty Flow U.S.

    CD Downloads Subscription/Streaming

    Digital Rad

    SoundExch

    SonyMusic

    WarnerUniversalRecorded

    MusicCompany

    Roy

    (Raby CRoy

    NPO for collectionPerforming Rights

    Physical Digital

    CDSales

    R

    RoyaltyAgreed rate with service

    provider and recordedcompany

    Sony Music Entertainment Japan Financial Summary

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    Sony Music Entertainment Japan Financial Summary

    57 64 65 66

    111

    53 5461 66

    37 3537

    4013 910

    14

    4 6

    10

    15

    -24 -27 -28-36

    -50

    0

    50

    100

    150

    200

    FY2014 FY2015 FY2016 FY2017

    140 141155 165

    OP/oku yen

    /

    Label, M

    Distribut

    Visual Bus

    Solution

    Business

    Artist Ma

    Publishing

    Net&Me

    HQ/Elim

    Visual

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    Visual

    Theme song hits lead to further promotion of the animation series and expand

    Big Hits from Linkage with Successful Animation Se

    Recorded Music vs Music Publishing

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    Recorded Music vs. Music Publishing

    Owns and monetizes an artists masterrecordings

    Plays pivotal role in discovering new artistsand helping hone their craft

    Ancillary income continues to grow inimportance (e.g. merchandising, TV fees, 360deals)

    Music PublishRecorded Music vs

    Owns and monetizes an artist(lyrics and melodies)

    Predominantly business-to-bumarketing spend

    Minimal overhead and low-cos Diverse income streams from

    licensing businesses

    EMI Music Publishing Overview

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    EMI Music Publishing Overview

    Nile(Acquisition Company)

    39.8% 60.2%

    AdministrationServices

    15% of NPS

    Mubadala and othfinancial investo

    MJ Estate25.13%

    SCA74.87%

    (DH Publishing)

    In June 2012, an investor group led by Sony Corporation of America and Mubadala Developmsovereign wealth fund from Abu Dhabi, acquired the music publishing business of EMI

    EMI entered into an administration deal with Sony/ATV to administerEMIs copyrights in exequal to 15% of NPS, subject to certain rights afforded to Mubadala and other equity investors

    Sony/ATV bears all incremental costs of administering EMI (A&R, Licensing, Royalty Processfor 15% of NPS

    Differences of Streaming on Publishers and Record Labels in the United States

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    g

    On-Demand Streaming

    (Spotify, Deezer, Rhapsody, etc.)

    Non-Interactive Streaming

    (Pandora, Sirius, Slacker, etc.)

    92.5%

    7.5%

    Records Publishing

    85.0%

    15.0%

    Records Publishing

    Strategic Alternatives for Digital Performance Rights in the United States

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    g g g

    Appeal of ASCAPand BMI RateDecisions

    US Department of

    JusticeConsent Decree

    Reform

    Withdrawal of

    Performing Rightsfrom PROs

    Performance Rights Organization in U S

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    Performance Rights Organization in U.S.

    PROs in U.S.

    ASCAP: The American Society of Composers, Authors and Publishers

    BMI : Broadcast Music, Inc.

    SESAC: Society of European Stage Authors and Composers

    A performance rights organization (PRO) provides intermediary functions, particuof royalties for performance, between copyright holders and parties.

    Technical term

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    Technical term

    Downloads : Digital download (e.g. iTunes) Purchase music, video contents and save to a user's local d

    computer, phone and smart phone

    Streaming : Streaming Service (e.g. Music Unlimited, Spotify, YouTube, VEV Listen music and watch video contents on server of serviceinternet

    User-selectable Consist paid and ad-supported (free) service

    Digital Radio : Digital Radio Services (e.g. Pandora, SiriusXM)

    Listen music and watch video contents on server of serviceinternet and satellite Unable to select music on demand Consist paid and ad-supported (free) service

    Interactive : User-selectable streaming services (e.g. Spotify, Deezer

    Non-Interactive : Radio service, Unable to select music on demand